Court Stays Proposed Ontario Class Action by Uber Drivers in Favour of Arbitration in the Netherlands

Article Content

Author: Anthony Pugh, Student-at-Law, Law Works P.C.

Editor: Ben Hanuka

In Heller v. Uber Technologies Inc., a January 30, 2018 decision of the Ontario Superior Court of Justice, the court decided that a proposed class action brought on behalf of Uber drivers should be stayed in favour of arbitration in the Netherlands.

The court held that the International Commercial Arbitration Act, 2017 (“ICAA”) applied, even if there was an employment relationship between the representative driver, Mr. Heller, and Uber.

The judge also found that, based on the “competence-competence” arbitration legal principle, the arbitrator should first decide questions of jurisdiction. There was no plain language in Ontario’s Employment Standards Act, 2000 (“ESA”) ousting arbitration. In addition, questions about Mr. Heller’s status as an employee and whether employment claims were arbitrable were complex questions of mixed fact and law.

Finally, the judge disagreed with Mr. Heller that the agreement was unconscionable, despite the presence of substantial inequality in bargaining power. It held that a court has far more limited discretion to grant a stay than it does in forum selection disputes.

Key facts

The defendants were part of a group of companies known collectively as Uber: Uber Technologies Inc., Uber Canada, Inc., Uber B.V., and Raiser Operations B.V.

The representative driver, Mr. Heller, brought the proposed class action on behalf of Uber drivers. He alleged that the class members were employees of Uber and were entitled to the benefits of the ESA. He sought $400 million in damages for the class and a declaration that Uber had violated the Act.

Mr. Heller contracted only with Uber parties located in the Netherlands. The resulting service agreement was governed by the law of the Netherlands and included an arbitration clause referring disputes to arbitration in Amsterdam.

Uber also provided dispute resolution services to drivers through customer service representatives.

Uber moved to have the proposed class action stayed pursuant to the ICAA or the Arbitration Act, 1991 (“AA”).

The ICAA applies

For the ICAA to apply, an arbitration agreement must be both ‘international’ and ‘commercial’.

The agreement was international. Mr. Heller’s place of business or employment was in Ontario, whereas the Uber companies he contracted with had their places of business in the Netherlands. Under Article 1(3)(a) of the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”), a commercial arbitration agreement is international if the parties have their places of business in different countries at the time of the conclusion of the agreement.

Alleged employment relationship

Mr. Heller claimed that his relationship with Uber was an employment relationship, not a commercial one. The Model Law does not provide a definition for “commercial”.

The judge found that employment relationships may be commercial. While some employment agreements are not commercial agreements, it does not follow that all employment agreements are outside the reach of the ICAA.

Under the competence-competence principle, it was for the arbitrator in the Netherlands to determine whether he or she had jurisdiction to decide if the agreements are employment contracts and whether the dispute was arbitrable. Mr. Heller should challenge the arbitrator’s jurisdiction in arbitration.

The competence-competence principle applies

Generally, challenges to the jurisdiction of an arbitration should first be resolved by the arbitrator. A court may depart from this general rule only if the challenge is based on a question of law or questions of mixed fact and law which only require superficial consideration of the documentary evidence.

Uber argued that the question of whether the drivers were employees is a complex question of mixed fact and law. Mr. Heller argued that the employment relationship was outside the jurisdiction of the arbitrator and that the court only needed to interpret the ESA.

Unlike the Consumer Protection Act, 2002, the ESA did not expressly oust arbitration agreements. Mr. Heller argued that it would be an absurd result and contrary to public policy for vulnerable non-unionized employees to be denied statutory rights and protections.

The judge disagreed with Mr. Heller’s approach. First, it assumed the drivers were employees, which begged the question of Mr. Heller’s proposed class action.

Second, the court’s role is to interpret statutes and to give effect to their plain meaning. The principle from Seidel v. TELUS Communications Inc. instructs courts to enforce arbitration clauses in commercial contracts absent legislative intervention. In that case, the majority of the Supreme Court of Canada found that a public interest plaintiff had a right to sue in court under a statutory provision in British Columbia’s Business Practices and Consumer Protection Act. However, the majority stayed her other statutory and common law actions in favour of arbitration.

The plain meaning of the ESA did not oust arbitration. Furthermore, the judge wrote that the competence-competence principle applies to Mr. Heller’s status as an employee to whether employment claims are arbitrable. These were complex questions of mixed fact and law.

Arbitration clauses not unconscionable

Mr. Heller argued that the court should not refer the matter to arbitration because the agreement was illegal on grounds of unconscionability. Relying on Douez v. Facebook, Inc., he took the position that the agreement was unconscionable because it was a contract of adhesion where he had no bargaining power.

Under subsection 7(2) of the AA and Article 8(1) of the Model Law, courts may refuse to stay proceedings if an arbitration agreement is invalid.

The judge found that Uber did not take advantage of Mr. Heller or any other drivers through inserting the arbitration clause. Most disputes between drivers and Uber could be handled in Ontario through the customer service representatives.

Only substantial disputes between Uber and the drivers would go to arbitration in the Netherlands. Mr. Heller was making a substantial claim for both himself and for the proposed class.

In Douez, the majority of the Supreme Court of Canada held that forum selection clauses in consumer contracts require special and different treatment than forum selection clauses in commercial contracts. This was in the context of discretionary court jurisdiction under the common law “strong cause” rule from Z.I. Pompey Industries v. ECU-Line N.V.

For arbitration agreements, there is very strong legislative direction under the ICAA and the AA that courts should only decline to refer a matter to arbitration if the dispute falls outside the arbitration agreement. Furthermore, six of the seven judges found that the arbitration clause in Douez was enforceable. However, three of those judges exercised their discretion not to enforce it.

For these reasons, the judge found that the matter should be stayed in favour of arbitration.

***

For more information about Law Works’ expertise and how we may be able to help you, please contact Ben Hanuka at https://www.lawworks.ca/book-a-consultation or by phone in Ontario at (855) 978-5293 and in British Columbia at (604) 262-1711.